April 29th, 2016 by Adam Armstrong
Seagate & WD See More Woes With The Release Of 3Q Earnings
The ride has gotten a bit bumpy for Seagate and WD as of late (though the road is rocky for a large portion of tech companies right now). Two weeks ago Seagate adjusted its earnings outlook trying to soften the blow of today. This lead us to speculate if Seagate’s lack of a robust flash portfolio may end up hurting them as they move forward in a world where flash is ascending the throne. WD also had a less than stellar earnings last quarter. Both companies have released their third quarter earnings to more bad news.
Image courtesy Yahoo Finance
Seagate is reporting just under $2.6 billion in revenue this quarter, down from $3.3 billion a year ago. This is also lower than last quarter’s revenue that was just under $3 billion. Seagate’s gross margin this quarter was 20.2%, down from 24.8% from last quarter. Though they reported a net income of $165 million last quarter, now they are reporting a net loss of $21 million and diluted loss per share of $0.07. Seagate’s Non-GAAP looked a bit better with a gross margin of 22.7%, a net income of $66 million, and diluted earnings per share of $0.22.
In this quarter Seagate also generated approximately $205 million in operating cash flow and paid cash dividends of $188 million with 298 million shares of ordinary stocks. And of course this news caused their stock to tank nearly 20% throughout the day.
Looking at WD, they reported a revenue of just over $2.8 billion this quarter, down form $3.55 billion from last year and down from $3.3 billion from last quarter. WD reported a gross margin of 26.7% down slightly from 27.3% last quarter. Net income was $74 million down significantly from last quarter’s $251 million. Again Non-GAAP was better with a gross margin of 28.1% and a net income of $283 million. WD’s stock sunk as well but not to the extent of Seagate’s. WD’s acquisition of SanDisk is still scheduled to go through later this year.
Both companies point to the changing market as the blame for the poor earnings. The Demand for HDDs is going down and the PC market is losing ground to the mobile market. It will be interesting to see how the companies respond to the changing market going forward. WD will be better positioned to compete in the flash arena with HGST and the mobile storage with SanDisk. Seagate is demonstrating some interesting advancements in flash as well.